Trump's threatened tariffs could see the cost of building a home in the US get much higher
As a US-Canada tariff war loomed into view last week, British Columbia premier David Eby – whose province ships billions of dollars’ worth of softwood lumber south of the border each year – had a stark message for Americans.
Those measures (a 25% levy on all Canadian imports crossing the border except energy, which was charged at 10%) would see a dramatic spike in the cost of building a home in the US, according to Eby.
“One out of every five to six lumber used in the US comes from Canada,” he told reporters, “and it just got 25% more expensive.”
A reprieve arrived with the last-ditch deal struck by US president Donald Trump and Canadian prime minister Justin Trudeau last Monday (February 3) to put off the tariffs. But the clock is already ticking on that 30-day delay, with potentially huge repercussions for Americans hoping to build a home if those moves go ahead.
A trade war, Eby stressed, would be good for neither country. Yet that lumber issue, a longstanding sore spot between the two neighbors, could erupt into a further crisis for an already lagging US home construction sector.
“We expect [the construction impact] would be even higher on the United States because they’re so reliant on Canadian lumber. Of course, there’s already tariffs on our lumber because of the ongoing trade dispute,” Kevin Lee (pictured top), chief executive officer of the Canadian Home Builders’ Association (CHBA), told Mortgage Professional America.
Industry associations had lobbied for lumber and other construction materials to be exempted from the tariffs – and Lee said steel would also be a “concerning” inclusion, with Trump having announced fresh duties on Canadian steel and aluminum even after agreeing the wider tariff deal with Trudeau.
Trade war could be on the way in March
Those new steel and aluminum measures, which Trump said applied “without exceptions or exemptions” are scheduled to take effect on March 12.
Last week, Wisconsin homebuilder David Belman told Bloomberg Trump’s tariffs could see the cost of building an average US home jump by nearly $30,000, thanks in large part to the tariffs on Canadian lumber.
That spells bad news for hopeful buyers, particularly those entering the market for the first time. “The hard part is it hurts the beginning buyer, the first-time homebuyer,” Belman said. “That’s going to reduce housing affordability, and that’s obviously something we, as builders, are all concerned with.”
Brendan McKay talks of the vital role the CFPB plays in stabilizing the mortgage industry, despite its flaws. He emphasizes that, while it’s not without challenges, the agency’s presence prevents economic collapse and ensures industry stability. https://t.co/82Q1WdRek8
— Mortgage Professional America Magazine (@MPAMagazineUS) February 4, 2025
Tariff talk signals further uncertainty for US homebuilding outlook
The chaos also marks unwelcome disruption for a US homebuilding industry that’s already struggling to pick up the pace on getting shovels in the ground.
In their last housing market index (HMI), a key gauge of builder confidence looking ahead, the National Association of Home Builders (NAHB) and Wells Fargo said current sales conditions had improved marginally in January 2025 compared with December – but sales expectations in the next six months were down as high borrowing costs and mortgage rates continue to strain affordability.
Thirty per cent (30%) of homebuilders slashed home prices in January, that survey showed – a steady trend since July – with prices falling by 5% on average.
The prospect of Federal Reserve rate cuts down the line this year could help improve sentiment, according to First American deputy chief economist Odeta Kushi, although the central bank has remained largely silent on whether it intends to cut in 2025.
Still, the NAHB has also sounded an optimistic recent tone on the future of the US economy, with chief economist Robert Dietz recently noting a “solid base to build on” – even though the housing outlook will be strongly influenced by whether Trump’s proposed tariffs come into play.
Crucial to mitigating the likely negative impact of huge lumber tariffs, Dietz said, is meaningful regulatory change.
“Tariffs on Canadian lumber are a near-term concern, with the existing duty rate speculated to increase from a current 14.5% rate to near 30% later this summer,” he wrote.
“With an additional 25% tariff on top of that, it would put the tax on Canadian lumber at near 55%. This is why regulatory reform that reduces the cost of land development, home construction and remodeling is now even more critical for improving housing attainability.”
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